Background of the case:

The Commission received a copy of Transparency International (“IT”) letter addressed to the Chairperson of Oil and Gas Regulatory Authority (“OGRA”). In the said letter, it was primarily alleged that the OCAC awarded Fuel Marketing Contract for kerosene without any competitive bidding process.

After due consideration of the preliminary probe, an enquiry was initiated under Section 37 (1) of the Act. The Enquiry Report examined whether the selection of the Fuel Marketing Contract, procurement methodology adopted, and determination of price can also be considered as ‘decision’ by OCAC and if so whether these conditions were a prima facie violation of Section 4 of the Competition Act, 2010.

The Enquiry Report concluded that the entire bidding process leading to selection of the bidder was managed and controlled by OCAC. OCAC appears to have adopted a procurement method that did not involve publishing an advertisement. It was noted that all the decision of OCAC, including the selection of FMC and the procurement methodology adopted had a direct bearing on the final price of kerosene, and therefore, it appears that OCAC had taken a decision in regard to the price of kerosene. It was concluded that the decision by OCAC to select the FMC, to adopt a procurement method whereby no advertisement was published and to fix the price of kerosene was a prima facie violation of Section 4(1) read with Sub-section (2) (a) of the Act.

Issues:>/h5>

i) Whether OCAC has violated the provisions of Section 4 of the Act?

ii) Remedies.

Order:

The Commission held OCAC possesses all the traits and features of an ‘association of undertaking’ and therefore qualifies as an undertaking under Section 2(1)(q) of the Competition Act.

The Commission also noted that the relevant market in the instant matter is the market for procurement of Fuel Marker Services for SKO and the geographic market is Pakistan.

OCAC submitted that it had not undertaken any activity on its own and all decisions were taken subject to the approval of the Federal Government, and that OCAC was compelled to follow the directions of the Federal Government. The Commission outlined the State Compulsion Test, as had been laid down under EU law, which was:

i. That the state must have been certain conduct compulsory (mere persuasion is insufficient)

ii. That the defense is available only where there is a legal basis for this compulsion; and

iii. That there must be no latitude at all for individual choice as to the implementation of the governmental policy.

The Commission held the aforesaid three points were not fulfilled in the instant matter.

The Commission held that the entire process of procurement undertaken by OCAC for procurement of Fuel Marking Company was in violation of Section 4 of the Act. Citing the compliance-oriented approach of OCAC, it was deemed appropriate to not penalize the parties in the instant matter. The OCAC and other parties to the instant proceedings were further directed to be mindful of the guidelines laid out in the instant matter.

Current Status:

The order in the instant matter has been complied with. The impugned tender has been suspended in line with the directions of the Commission.